The Australian property market has appeared to have weathered the world economic downturn, but there are concerns that increased property prices could result in owners failing to meet their mortgage payments as 16% of property owners struggled to pay loans in November 2009, up from 11.7% in May 2009, according to the Mortgage Finance Association of Australia (MFAA).

Interest rate increases, a lack of supply and high land prices have also added to the problem.

Phil Naylor, MFAA ’s chief executive officer, said: ‘Recent interest rate increases are negatively impacting households. Confidence in the housing market is not only at pre-global financial crisis, it’s back to where it was during the height of the housing boom.’

The MFAA also reported that 73% of Australians expect property prices to rise, compared to 23% of respondents in May 2009, which is the highest proportion in over three years.

House and apartment construction remained slow between February 2008 and July 2009, and property starts declined in late 2099 as banks curtailed lending and the global financial crisis kept development in check. New home construction rose +9.4% in the Q3 compared to the previous quarter, the first increase in 12 months, according to the Australian Bureau of Statistics (ABS).

Median house prices in Australia’s eight state and territory capitals climbed by +4.8% in Q4 2009 to AU$525,524 and were +12% higher than a year ago, according to Australian Property Monitors (APM).